Newstead v Frost
| Jurisdiction | England & Wales |
| Judge | Lord Salmon,Lord Fraser of Tullybelton,Lord Keith of Kinkel |
| Judgment Date | 31 January 1980 |
| Judgment citation (vLex) | [1980] UKHL J0131-1 |
| Date | 31 January 1980 |
| Court | House of Lords |
[1980] UKHL J0131-1
House of Lords
Mr. Frost claims that as the control and management of the business of the partnership was situated abroad—that was a term of the partnership agreement—its business is to be deemed to have been carried on by persons resident outside the United Kingdom with the consequence that his profits from his activities are not to be regarded as having accrued to a person residing in the United Kingdom and so are not assessable under Case II.
Further it is contended on his behalf that Case V of Schedule D is the case applicable. Under that Case tax is to be charged
"in respect of income arising from possessions out of the United Kingdom, not being income consisting of emoluments of any office or employment."
Section 122 of the Income and Corporation Taxes Act 1970 provides by subsection (1) that income tax chargeable under Case V is to be computed on the income arising in the year preceding the year of assessment "whether the income has been or will be received in the United Kingdom or not". Subsection (2) states that subsection (1) is not to apply to "any income which is immediately derived by a person from the carrying on by him of any trade, profession or vocation, either solely or in partnership". In the case of such income subsection (3) provides that tax shall be charged only on the full amount of the actual sums received in the United Kingdom in the year preceding the year of assessment from remittances payable in the United Kingdom.
Mr. Frost contended that as no part of his earnings in the United States were remitted to the United Kingdom in the years in respect of which he was assessed to tax on his earnings in the United States, he should not have been assessed to tax in any sum in respect thereof.
The Revenue did not contend that Mr. Frost's income from the carrying on of his profession in the United States was not immediately derived by him from the carrying on of his profession, either solely or in partnership, though the payments for his activities were received first by the Hellespont company and then from that company by the Tamarisk company and then from that company by the partnership. So for the purposes of this appeal, one must assume that subsection (2) of section 122 applies.
The Revenue challenged the conclusions of the Commissioners which were upheld by Browne-Wilkinson J. and by the Court of Appeal (Buckley, Roskill & Goff L.JJ), on a number of grounds.
Their main contention was that the Commissioners findings that during the relevant years there was a partnership between the appellant and the company was erroneous in law. It was said acts done by one partner which another partner could not perform could not be regarded as acts done for the partnership. Reliance was placed on the following passage in Lindley on Partnership 13th Ed p. 44:—
"Speaking generally, no person can do by his agent what he cannot do himself; and although each member of a firm is a principal as regards his own conduct, he is the agent of his co-partners; and he cannot therefore do for the firm what they cannot do. In other words, the disability of one of the partners affects the whole firm, so that the legal capacity of the firm is no greater than that of the partner with the least legal capacity."
As Lord Loreburn L.C. said in De Beers Consolidated Mines Ltd. v. Howe [1906] A.C. 455 at p. 458 "A company cannot eat or sleep". Neither can it be a television entertainer or author and so it was said that there could not be in law a partnership between Mr. Frost and the company which covered their appearances as television entertainers or their being authors. But the partnership agreement was not an agreement between them that they should entertain on television or write books. Clause 1 of the agreement as amended provided that they should become and remain partners
"in the business of exploiting copyright and interests in copyright and in the businesses of television and film consultants and advisers publicity agents and providers of publicity services and facilities and in the business of producing television programmes, films, stageplays and other entertainment and using and exploiting the services of producers, actors, directors, writers and artistes, and material and facilities which may be used for the production of television programmes, films, stageplays and other entertainments, and in the business of television, films and stage advisers and agents throughout the world outside the United Kingdom."
Under this clause the partnership could...
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Re Equipment Maintenance Ltd
...have accepted objects clauses of great breadth (see Bell Houses Ltd v City Wall Properties Ltd [1966] 2 Q.B. 656 and Newstead v Frost [1980] 1 W.L.R. 135 ). Analysis 32 I must say that one of the dangers of Lord Hoffman's conceptual approach to background information was threatening to ov......
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Ingenious Games LLP and Others v Revenue and Customs Commissioners
...little weight on the finding that the only intention of the appellants was to obtain a tax benefit. [313] In Newstead (HMIT) v Frost (1980) 53 TC 525 at p. 552 Viscount Dilhorne referred to the 1890 Act test, concluding that whilst it was clear that in the case with which he was concerned t......
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Newstead (HM Inspector of Taxes) v Frost
...1 WLR 511; [1978] 2 All ER 241; [1978] STC 239; 122 SJ 33; (CA) [1978] 1 WLR 1441; [1979] 2 All ER 129; [1979] STC 45; 122 SJ; 813; (HL) [1980] 1 WLR 135; [1980] 1 All ER 363; [1980] STC 123; 124 SJ 1 Not included in the present print. 1 2 TC 490. 1 [1966] 1 WLR 1402. 1 47 TC 580, at p 581.......
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IRC v Richmond and Jones (Re Loquitur Ltd)
...was that they had not been acquired as trading stock. In my judgment, the same considerations apply to the decision in Newstead v Frost [1980 ] 1 WLR, 135. … In that case, the taxpayer formed a Bahamian partnership between himself and a Bahamian company for the sole purpose of minimising hi......
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Formation and Expansion
...Cameron Marsh and Time Critical International Limited [2010] EWHC 1563 (Ch), [2010] All ER (D) 235 (Jun). 9 See e.g. Newstead v Frost [1980] 1 WLR 135. 10 Stekel v Ellice [1973] 1 WLR 191. Formation and Expansion 15 v Zahid (a firm) and others , 11 the Court of Appeal held that there was a ......
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Table of Cases
...(Dec) 17, 50 Nationwide Building Society v Lewis [1997] 1 WLR 1181, [1997] 3 All ER 498, ChD 92 Newstead (Inspector of Taxes) v Frost [1980] 1 WLR 135, [1980] 1 All ER 363, [1980] STC 123, HL 14 Niemann v Niemann (1890) 43 Ch D 198, 59 LJ Ch 220, 38 WR 258, CA 83, 84 Northampton Regional Li......